The contribution margin (CM) is the difference between the net selling price of a dish or drink and its variable costs — in hospitality primarily the cost of goods. It shows how much every item sold contributes to covering fixed costs (rent, payroll, energy) and to profit. Revenue does not feed you — contribution margin does: a dish with an 80% CM ratio can earn more at a lower price than the expensive bestseller with a high cost of goods.
CM II additionally deducts directly attributable variable costs (e.g. proportionate energy or casual staff hours for an event). For day-to-day menu steering, CM I is usually sufficient — calculated consistently across all items.
Enter gross selling price, VAT rate and cost of goods.
Kitchen rule of thumb: aim for a CM ratio ≥ 65–70% (equal to a cost-of-goods ratio ≤ 30–35%); beverages usually score considerably higher.
VAT is a pass-through item — it belongs neither to the business's revenue nor to the contribution margin. Calculating gross systematically overstates your margin.
As a ratio: 65–70% and above. In absolute terms the euro amount counts: €12 CM on an €18 dish beats a 70% ratio on a €6 snack. Consider both together.
Permanently employed staff are a fixed-cost block and stay out of CM I. Only directly attributable variable deployments (e.g. extra casual staff for a banquet) can flow into a CM II.